class: center, middle, inverse, title-slide .title[ # Principles of Macroeconomics ] .author[ ### ECO 2307 ] .date[ ### <em>Spring 2023</em> ] --- class: center, middle, inverse # Chapter 12 ## Aggregate Expenditure and Output in the Short Run --- ## Aggregate Expenditure Model .panelset.sideways[ .panel[.panel-name[Intro] **Aggregate expenditure model** - a macroeconomic model that focuses on the short-run relationship between total spending and real GDP - assuming the price level is constant - focus on short-run determination of total output in an economy **Aggregate expenditure (AE)** - is total spending in the economy - `\(AE = C + I + G + NX\)` - Consumption `\((C)\)`: spending by households on goods/services - Planned investment `\((I)\)`: planned spending by firms on capital goods and by households on new homes - Government purchases `\((G)\)`: spending by all levels of government on goods/services - Net exports `\((NX)\)`: `\(exports - imports\)` ] .panel[.panel-name[Investment] **Planned investment vs. actual investment** - planned investment spending does not include the build-up of *inventories* - **inventories**: goods that have been produced but not yet sold - `\(I_{planned} = I_{actual} - \textit{unplanned change in inventories}\)` **Example** - Doubleday Publishing expects to sell 1.5 million copies of a book, So, they print 1.5 million copies - If they sell 1.5 million => no unplanned change in inventories - If they sell 1.2 million => unplanned *increase* in inventories - If they sell 1.7 million => unplanned *decrease* in inventories **Notes** - this is how `\(AE\)` differs from `\(GDP\)` - BEA measures *actual investment*, but we assume this is close enough to *planned investment* ] .panel[.panel-name[Macro Equilibrium] #### Equilibrium - spending on output equals output produced - `\(AE = Y\)` #### Recall, - `\(Y = C + I_{actual} + G + NX\)` - `\(AE = C + I_{planned} + G + NX\)` #### So, when is macro equilibrium achieved? <!-- When `\(I_{actual} == I_{planned}\)` --> ] .panel[.panel-name[AE vs. GDP] ### Relationship between AE and GDP <img src="data:image/png;base64,#images/tab_12_2.png" width="100%" style="display: block; margin: auto;" /> ] ] --- ## Determining the Level of AE in the Economy ### Overview #### We will explore the role of the components of aggregate expenditure #### Use *real* terms (2012 dollars), not nominal <br> <img src="data:image/png;base64,#images/tab_12_3.png" width="80%" style="display: block; margin: auto;" /> <!-- The table shows the values of the components of expenditure in 2020. --> <!-- Clearly consumption is the largest portion, with investment and government expenditures being roughly similarly sized. --> <!-- Net exports were negative in 2020; the value of U.S. imports was greater than the value of U.S. exports. --> --- ## Determining the Level of AE in the Economy ### Consumption .panelset[ .panel[.panel-name[Determinants] .pull-left[ #### Trends - Consumption tends to follow a relatively smooth, upward trend - Growth declines during periods of recession #### What affects the level of consumption? 1. Current disposable income 2. Household wealth 3. Expected future income 4. The price level 5. The interest rate ] .pull-right[ <img src="data:image/png;base64,#images/fig_12_1.png" width="100%" style="display: block; margin: auto;" /> ] ] .panel[.panel-name[Volatility] .pull-left[ #### Why is spending on durable goods like cars and RVs so volatile? 1. Durable goods are long-lived (consumption smoothing) 2. Good substitutes exist (used market) 3. High prices make them risky purchases (default risk) 4. Pent-up demand typically follows a recession 5. Interest rates fluctuate ] .pull-right[ <img src="data:image/png;base64,#images/fig_12_2.png" width="100%" style="display: block; margin: auto;" /> ] ] .panel[.panel-name[Consumption Fn] #### How strong is the relationship between income and consumption? .pull-left[ <img src="data:image/png;base64,#images/fig_12_3.png" width="90%" style="display: block; margin: auto;" /> ] .pull-right[ **Consumption function**: the relationship between consumption spending and disposable income **Marginal propensity to consume (MPC)** - the amount by which consumption spending changes when disposable income changes - MPC is the *slope* of the consumption function - relatively constant for consumers (see graph) ] ] .panel[.panel-name[MPC] $$ `\begin{aligned} MPC = \frac{\textit{Change in consumption}}{\textit{Change in disposable income}} = \frac{\Delta C}{\Delta YD} \end{aligned}` $$ .pull-left[ **Problem:** From 2018 to 2019, consumption increased by $312 billion, while disposable income increased by $316 billion. Find the marginal propensity to consume. Given this MPC, what would we expect the change in consumption to be from a $10 billion increase in income. ] .pull-right[ **Solution:** $$ `\begin{aligned} MPC &= \frac{\Delta C}{\Delta YD} \\ &= \frac{312}{316} = 0.99 \\ \\ \Delta C &=\Delta YD \times MPC \\ &= 10\text{ billion}\times .99 \\ &= 9.9 \text{ billion} \end{aligned}` $$ <!-- We would expect a $9.9 billion increase in consumption from a $10 billion increase in income given a marginal propensity to consume of 0.99. --> ] ] .panel[.panel-name[Nat. Inc.] #### National Income For this model, assume $$ \textit{National income} = \textit{GDP} $$ This allows us to rewrite this relationship as: $$ `\begin{aligned} \textit{Disposable income} &= \textit{National income} - \textit{Net taxes}\\ GDP = \textit{National income} &= \textit{Disposable income} + \textit{Net taxes} \end{aligned}` $$ where `\(\textit{Net taxes} = T - TR\)` If we now assume net taxes do not change as national income changes, $$ \Delta \textit{Disposable income} = \Delta \textit{National income} $$ ] .panel[.panel-name[MPC and NI] #### Marginal propensity to consume and National Income <img src="data:image/png;base64,#images/fig_12_4.png" width="70%" style="display: block; margin: auto;" /> ] .panel[.panel-name[Saving] By definition, disposable income not spent is saved. Therefore $$ Y = C + S + T $$ Any change in national income can be decomposed into changes in the items on the right side: $$ \Delta Y = \Delta C + \Delta S + \Delta T $$ We assume net taxes do not change, so `\(\Delta T = 0\)`, then $$ \Delta Y = \Delta C + \Delta S $$ Dividing through by `\(\Delta Y\)` gives: $$ \frac{\Delta Y}{\Delta Y}=\frac{\Delta C}{\Delta Y}+\frac{\Delta S}{\Delta Y} $$ ] .panel[.panel-name[MPS] $$ \frac{\Delta Y}{\Delta Y}=\frac{\Delta C}{\Delta Y}+\frac{\Delta S}{\Delta Y} $$ .pull-left[ **Marginal propensity to save (MPS)** - the amount by which savings changes when disposable income changes - `\(MPS = \frac{\Delta S}{\Delta Y}\)` ] .pull-right[ Recall, **marginal propensity to consume** - the amount by which consumptino changes when income changes - `\(MPC = \frac{\Delta C}{\Delta Y}\)` ] **Given MPS and MPC definitions** - we can rewrite the above equation as `\(1 = MPC + MPS\)` - any increase is income is divided between consumption and saving - whatever is not consumed is saved ] ] --- ## Determining the Level of AE in the Economy ### Investment, Government Spending, and Net Exports .panelset.sideways[ .panel[.panel-name[Investment] .pull-left[ #### Trends - Investment has increased over time - Unlike consumption, it has not increased smoothly - Recessions decrease investment more #### What affects the level of investment? 1. Expectations of future profitability 2. The interest rate 3. Taxes 4. Cash flow ] .pull-right[ <img src="data:image/png;base64,#images/fig_12_5.png" width="100%" style="display: block; margin: auto;" /> ] ] .panel[.panel-name[Student loans] #### Is Student Loan Debt Causing Fewer Young People to Buy Houses? <img src="data:image/png;base64,#images/fig_12_5b.png" width="65%" style="display: block; margin: auto;" /> ] .panel[.panel-name[Gov't purchases] <img src="data:image/png;base64,#images/fig_12_6.png" width="70%" style="display: block; margin: auto;" /> ] .panel[.panel-name[Net Exports] <img src="data:image/png;base64,#images/fig_12_7.png" width="70%" style="display: block; margin: auto;" /> ] .panel[.panel-name[NX Determinants] <img src="data:image/png;base64,#images/tab_nx.png" width="70%" style="display: block; margin: auto;" /> ] ] --- ## Macroecenomic Equilibrium .pull-left[ ### Types of Analyses **Graphical analysis** of macroeconomic equilibrium can tell us the *qualitative* changes that take place. But an **equation-based model** can allow us to make *quantitative* or numerical estimates of what will occur. Economists in universities, firms, and the government rely on **econometric models** in which they statistically estimate the relationships between economic variables. ] .pull-right[  ] --- ## Graphing Macroeconomic Equilibrium .panelset[ .panel[.panel-name[Intro] .pull-left[ Suppose in the whole economy there is a single product: Pepsi. - For the Pepsi economy to be in equilibrium, - the amount of Pepsi produced must equal the amount of Pepsi sold. - Otherwise, inventories of Pepsi rise or fall. `\(45^{\circ}\)` line - all points are possible equilibria (e.g., `\(A\)` or `\(B\)`) - all points above are depleting inventories (increase production) - all points below or growing inventories (decrease production) ] .pull-right[ <img src="data:image/png;base64,#images/fig_12_8.png" width="100%" style="display: block; margin: auto;" /> ] ] .panel[.panel-name[Keynesian Cross] <img src="data:image/png;base64,#images/fig_12_9.png" width="50%" style="display: block; margin: auto;" /> ] .panel[.panel-name[Eq'm] ### Determining Equilibrium #### How do we know which point will be the equilibrium in a given year? - We use the households' consumption function (C) - This is based on the fact that households consume some of their additional income and save the rest #### GDP = AE - real GDP needs to equal planned aggregate expenditure - `\(Y = C + I + G + NX\)` - So we need to find the right level of C... - Let's use the `\(45^{\circ}\)` line diagram ] .panel[.panel-name[Eq'm and 45 line] <img src="data:image/png;base64,#images/fig_12_10.png" width="50%" style="display: block; margin: auto;" /> ] .panel[.panel-name[Equilibria] .pull-left[ <img src="data:image/png;base64,#images/fig_12_11.png" width="100%" style="display: block; margin: auto;" /> ] .pull-right[ <img src="data:image/png;base64,#images/fig_12_12.png" width="100%" style="display: block; margin: auto;" /> ] ] .panel[.panel-name[Inventories] ### Role of Inventories **Example** - In 2009, the “Great Recession” was about to end. - But real GDP fell sharply in the first quarter of 2009—at a 4.4% annualized rate - What was the role of inventories **Inventories play a critical role in this model of the economy** - Unplanned inventories `\(\uparrow\)` when `\(AE < GDP_{real}\)` - Even when spending returns to normal, - takes time to sell off excess inventories - => cut back on production ] .panel[.panel-name[Eq'm Table] <img src="data:image/png;base64,#images/tab_12_4.png" width="100%" style="display: block; margin: auto;" /> ] ] --- ## The Multiplier Effect .panelset[ .panel[.panel-name[Intro] .pull-left[ Small change in planned aggregate expenditure causes a larger change in equilibrium real GDP Planned investment, government purchases, and net exports are **autonomous expenditures** - **autonomous expenditures**: expenditures that do not depend on the level of GDP - Consumption has autonomous + induced effect => upward sloping AE line Initial increase/decrease from injection/leakage will have a multiplied effect Example: Decrease in interest rates ] .pull-right[  ] ] .panel[.panel-name[Multiplier Effect] .pull-left[ <img src="data:image/png;base64,#images/fig_12_13.png" width="100%" style="display: block; margin: auto;" /> ] .pull-right[ **How long will it take to adjust to macroecomic equlibrium?** - Can't say - But we can calculate the value of the multiplier - the eventual change in real GDP divided by the change in autonomous expenditures - note: autonomous expenditures = planned investment, in this case $$ \frac{\Delta Y}{\Delta I} = \frac{800 billion}{200 billion} = 4 $$ **What does multiplier of 4 mean?** - each $1 increase in planned investment (or any other autonomous expenditure) - eventually increases equilibrium real GDP by $4 ] ] .panel[.panel-name[MPC] .pull-left[ We can also figure out the eventual value of the multiplier through the marginal propensity to consume: - In each “round,” the additional income prompts households to consume some fraction `\((MPC = 0.75)\)`. The total change in equilibrium real GDP equals: - Initial increase in planned investment spending: `\(= 200 billion\)` - Plus first induced increase in consumption: `\(= MPC \times 200 billion\)` - Plus second induced increase in consumption: `\(= MPC^2 \times 200 billion\)` - Plus third induced increase in consumption: `\(= MPC^3 \times 200 billion\)` - And so on... ] .pull-right[ <img src="data:image/png;base64,#images/tab_12_5.png" width="90%" style="display: block; margin: auto;" /> ] ] .panel[.panel-name[Formula] The previous result gives us the following infinite sum for **Total Change in GDP**: $$ `\begin{aligned} &= 200billion + MPC\times200billion + MPC^2\times200billion+MPC^3\times200billion+ ...\\ &= 200billion \times(1 + MPC + MPC^2 + MPC^3+...)\\ \text{Total Change in GDP} &= 200billion\times \frac{1}{1-MPC} \end{aligned}` $$ In our case, - `\(MPC = 0.75\)`, so the multiplier is `\(\frac{1}{1-0.75}=4\)` - A $200 billion increase in investment eventually results in a $800 billion increase in equilibrium real GDP. General formula: $$ Multiplier = \frac{\textit{Change in equilibrium real GDP}}{\textit{Change in autonomous expenditure}} = \frac{1}{1-MPC} $$ ] .panel[.panel-name[Summary] 1. The multiplier effect occurs both for an increase and a decrease in planned aggregate expenditure. 2. Because the multiplier is greater than 1, the economy is sensitive to changes in autonomous expenditure. - This can result in spillover effects 3. The larger the MPC, the larger the value of the multiplier. - Recall, larger MPC means you consume more after a change in income 4. Our model is somewhat simplified, omitting some real-world complications. <br><br> For example, as real GDP changes, these change: + imports, + inflation, + interest rates, and + income taxes <br><br> Thus, the simplified model will *overstate* multiplier effect ] .panel[.panel-name[Example] <table> <thead> <tr> <th style="text-align:right;"> Y </th> <th style="text-align:right;"> C </th> <th style="text-align:right;"> I </th> <th style="text-align:right;"> G </th> <th style="text-align:right;"> NX </th> </tr> </thead> <tbody> <tr> <td style="text-align:right;"> $18,000 </td> <td style="text-align:right;"> $15,400 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $-500 </td> </tr> <tr> <td style="text-align:right;"> $19,000 </td> <td style="text-align:right;"> $16,200 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $-500 </td> </tr> <tr> <td style="text-align:right;"> $20,000 </td> <td style="text-align:right;"> $17,000 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $-500 </td> </tr> <tr> <td style="text-align:right;"> $21,000 </td> <td style="text-align:right;"> $17,800 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $-500 </td> </tr> <tr> <td style="text-align:right;"> $22,000 </td> <td style="text-align:right;"> $18,600 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $-500 </td> </tr> </tbody> </table> A. What is the equilibrium level of real GDP? B. What is the MPC? C. Suppose government purchases increase by $200 billion. What will be the new equilibrium level of real GDP? Use the multiplier formula to determine your answer. ] .panel[.panel-name[A] <table> <thead> <tr> <th style="text-align:right;"> Y </th> <th style="text-align:right;"> C </th> <th style="text-align:right;"> I </th> <th style="text-align:right;"> G </th> <th style="text-align:right;"> NX </th> <th style="text-align:right;"> AE </th> </tr> </thead> <tbody> <tr> <td style="text-align:right;"> $18,000 </td> <td style="text-align:right;"> $15,400 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $-500 </td> <td style="text-align:right;"> $18,400 </td> </tr> <tr> <td style="text-align:right;"> $19,000 </td> <td style="text-align:right;"> $16,200 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $-500 </td> <td style="text-align:right;"> $19,200 </td> </tr> <tr> <td style="text-align:right;"> $20,000 </td> <td style="text-align:right;"> $17,000 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $-500 </td> <td style="text-align:right;"> $20,000 </td> </tr> <tr> <td style="text-align:right;"> $21,000 </td> <td style="text-align:right;"> $17,800 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $-500 </td> <td style="text-align:right;"> $20,800 </td> </tr> <tr> <td style="text-align:right;"> $22,000 </td> <td style="text-align:right;"> $18,600 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $-500 </td> <td style="text-align:right;"> $21,600 </td> </tr> </tbody> </table> A. **What is the equilibrium level of real GDP?** - Calculate the level of planned aggregate expenditure for each level of real GDP $$ AE = C + I_{planned} + G + NX $$ ] .panel[.panel-name[B] <table> <thead> <tr> <th style="text-align:right;"> Y </th> <th style="text-align:right;"> C </th> <th style="text-align:right;"> I </th> <th style="text-align:right;"> G </th> <th style="text-align:right;"> NX </th> <th style="text-align:right;"> AE </th> </tr> </thead> <tbody> <tr> <td style="text-align:right;"> $18,000 </td> <td style="text-align:right;"> $15,400 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $-500 </td> <td style="text-align:right;"> $18,400 </td> </tr> <tr> <td style="text-align:right;"> $19,000 </td> <td style="text-align:right;"> $16,200 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $-500 </td> <td style="text-align:right;"> $19,200 </td> </tr> <tr> <td style="text-align:right;"> $20,000 </td> <td style="text-align:right;"> $17,000 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $-500 </td> <td style="text-align:right;"> $20,000 </td> </tr> <tr> <td style="text-align:right;"> $21,000 </td> <td style="text-align:right;"> $17,800 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $-500 </td> <td style="text-align:right;"> $20,800 </td> </tr> <tr> <td style="text-align:right;"> $22,000 </td> <td style="text-align:right;"> $18,600 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $1,750 </td> <td style="text-align:right;"> $-500 </td> <td style="text-align:right;"> $21,600 </td> </tr> </tbody> </table> B. **What is the MPC?** $$ `\begin{aligned} MPC &= \frac{\Delta C}{\Delta Y} \\ MPC &= \frac{\text{\$800 billion}}{\text{\$1,000 billion}} = 0.8 \end{aligned}` $$ ] .panel[.panel-name[C] C. **Suppose government purchases increase by $200 billion. What will be the new equilibrium level of real GDP? Use the multiplier formula to determine your answer.** - Start by calculating the multiplier: $$ Multiplier = \frac{1}{1-MPC}=\frac{1}{1-0.8}=5 $$ - Then calculate the *change in equilibrium real GDP* $$ `\begin{aligned} \Delta GDP &= (\text{Change in Autonomous Expenditure}) \times \text{Multiplier} \\ &= \text{\$200 billion} \times 5 \\ &= \text{\$1,000 billion} \end{aligned}` $$ - Then calculate the *new level of equilibrium GDP* $$ `\begin{aligned} GDP_{\textit{new eq'm}} &= GDP_{\textit{old eq'm}} + \Delta GDP \\ &= \text{\$20,000 billion} + \text{\$1,000 billion} \\ &= \text{\$21,000 billion} \end{aligned}` $$ ] ] --- ## Algebra of Macroeconomic Equilibrium .panelset[ .panel[.panel-name[Intro] .pull-left[ ### Types of Analyses **Graphical analysis** of macroeconomic equilibrium can tell us the *qualitative* changes that take place. But an **equation-based model** can allow us to make *quantitative* or numerical estimates of what will occur. Economists in universities, firms, and the government rely on **econometric models** in which they statistically estimate the relationships between economic variables. ] .pull-right[ ### Let's get into some numbers  ] ] .panel[.panel-name[Example] .pull-left[ 1. Consumption function - `\(C = \overline{C} + MPC*Y\)` - `\(C = 2000 + 0.65Y\)` 2. Planned investment function - `\(I = \overline{I}\)` - `\(I = 3500\)` 3. Government purchases function - `\(G = \overline{G}\)` - `\(G = 2000\)` 4. Net export function - `\(NX = \overline{NX}\)` - `\(NX = -500\)` 5. Equilibrium function - `\(Y = C + I + G + NX\)` ] ] .panel[.panel-name[Solving the Example] .pull-left[ #### Example $$ `\begin{aligned} Y &= C + I + G + NX\\ Y &= 2,000 + 0.65Y + 3,500 + 2,000 - 500\\ Y-0.65Y &= 2,000 + 3,500 + 2,000 - 500\\ 0.35Y &= 7,000\\ Y &= $20,000 \end{aligned}` $$ ] .pull-right[ #### General $$ `\begin{aligned} Y &= \overline{C} + MPC*Y + \overline{I} + \overline{G} + \overline{NX} \\ Y - MPC*Y &= \overline{C} + \overline{I} + \overline{G} + \overline{NX} \\ Y(1-MPC) &= \overline{C} + \overline{I} + \overline{G} + \overline{NX} \\ Y &= \frac{ \overline{C} + \overline{I} + \overline{G} + \overline{NX}}{1-MPC}\\ Y &= \frac{1}{1-MPC}*( \overline{C} + \overline{I} + \overline{G} + \overline{NX}) \end{aligned}` $$ ] #### Thus, we have: $$ \textit{Equilibrium GDP} = \textit{Autonomous Expenditure} \times \textit{Multiplier} $$ ] ] --- ## Paradox of Thrift #### Recall the savings identity: - savings equals investment - This implied that savings were the key to long-term growth -- #### What happens in the short-term if people save more: - consumption decreases, and hence incomes decrease, - so consumption decreases… potentially pushing the economy into recession. - John Maynard Keynes referred to this as the paradox of thrift: - what appears to be favorable in the long-run may be counterproductive in the short-run -- #### Economists debate whether this paradox of thrift really exists: - increasing savings decreases the real interest rate; - the consequent increase in investment spending may offset the decrease in consumption spending. --- ## The Aggregate Demand Curve .panelset[ .panel[.panel-name[Intro] #### As demand for a product rises, we expect that two things will occur: - production will increase and - so will the product’s price #### Our model has concentrated on the first of these, but what about *price changes*? #### In the larger economy, we also expect that an increase in aggregate expenditure would increase the price level. #### Will this price level change have a feedback effect on aggregate expenditures? ] .panel[.panel-name[Price levels] #### The price level affects aggregate expenditures in three ways: 1. Rising price levels decrease the real value of household wealth, causing consumption to fall. 2. If price levels rise in the U.S. faster than in other countries, U.S. exports fall and imports rise, causing net exports to fall. 3. When prices rise, firms and households need more money to finance buying and selling. If the supply of money doesn’t change, the interest rate must rise; this will cause investment spending to fall. #### Note: - Of course, these effects work in reverse if the price level falls. - Each effect works in the same direction, so rising price levels decrease aggregate expenditures, while falling price levels increase aggregate expenditures. ] .panel[.panel-name[Price level change] <img src="data:image/png;base64,#images/fig_12_14.png" width="85%" style="display: block; margin: auto;" /> ] .panel[.panel-name[Aggregate demand] <img src="data:image/png;base64,#images/fig_12_15.png" width="70%" style="display: block; margin: auto;" /> ] ]